The local market will witness a slowdown in development speed due to the low level of equity for real estate investments and due to the sentiment of distrust triggered by the international financial crisis. Developers will see lower development margins, not more than 17 to 20 percent of the value of the building, said Stefano Albarosa, CEO of Cefin Group, which invests in real estate locally.

While the speed of development will be altered, the ability to make a fast exit will also be shattered, and developers should be prepared to hold more onto a project before selling, said Albarosa. This will be caused by the same late effects of the financial crisis, which put a brake on real estate deals in Romania.

The sentiment of slowdown has been felt by players on different levels on the market, which went through a rather dead first quarter of the year. Few transactions have been closed since the beginning of the year, with recent buyers like Deutsche Bank’s RREEF and Natixis’ AEW Europe having performed 78 percent of the deals, according to Viorel Lacatus, investment director with Atisreal Romania.

There are less players looking for property on the Romanian market than they used to be one year ago. Some players, such as the listed funds, are even totally out of the market, says Gijs Klomp, managing director of ING RE Investment Management in Romania. Countries are affected because of the sentiment of crisis, not because of fundamental problems, says Klomp. The market has turned from a borrowers’ market into a landlords’ one, he adds.

While many owners need to sell fast and less equity is available out there, the yields in the region have slighly increased, so Romania needs to offer more than it currently does in order to attract investors currently deciding where in the region to invest. Temporarily, Romania is less attractive for shareholders of real estate investment companies than it used to be, but the country will be re-priced, says Klomp.

The effects of the crisis has also led to investments in Romania competing with investments on more mature and attractive market, which used to be more expensive, but which were re-priced following the credit crunch. “Investors can now buy offices in London for the same price America House in Bucharest was sold last year,” says Klomp. AEW Europe bought America House from developer GTC last year for EUR 120 million.

Corina Saceanu